Saturday, August 22, 2020 /08: 00 AM / by Tom Kool of Oilprice.com / Header Image Credit: Oilprice
With so much bullish news in recent weeks, the
fact that oil prices have failed to break out does not bode well for markets in
the coming weeks.
Friday, August 21st, 2020
Oil retreated at the end of the week on more negative news from the U.S. labor
market. Oil prices fell back to a familiar trading range in the low-$40s. "With
all the bullish headlines that we've seen over the last weeks regarding
inventories," the inability to break higher does not bode well, Tariq Zahir,
managing member of the global macro program at Tyche Capital Advisors LLC,
told Bloomberg. "Crude fails to break to the upside and you're in a contango market,
so risk is to the downside."
markets surge on Chinese stimulus. Copper prices
surged to a two-year high at over $6,700 per tonne this week. Other metals
followed suit. The combination of monetary stimulus, a weaker dollar and
China's fiscal stimulus has led to a surge in metals prices.
Inventories falling slower than expected. U.S. oil
inventories declined again last week, the fifth time in six weeks. But the
process will take a while. OPEC warned that the drawdowns are "slower than anticipated with growing risks
of a prolonged wave of COVID-19." The slow pace underscores the "fragility of
offset could total 2.3 mb/d. The group of OPEC+
producers that may need to compensate for past overproduction could cut by as
much as 2.31 mb/d for one month, according to OPEC+ calculations seen by Reuters. If spread over more than one month, the figure would be smaller.
attack Mozambique LNG. A major LNG project in
Mozambique could face delays as Islamic militants seized a port handling key equipment. The
multi-billion-dollar project is backed by Total (NYSE: TOT).
GNA announces ceasefire. Libya's
internationally-recognized government in Tripoli announced an immediate ceasefire. The head of the Government of National
Accord, or GNA, issued instructions to "all military forces to immediately
cease fire and all combat operations in all Libyan territories." The GNA also
called for elections in March and an end to the oil embargo.
gas prices surge, but drillers not coming back yet. Natural
gas prices have shot up to $2.30/MMBtu, as a heatwave, supply shut-ins, and LNG
cancellations have quickly tightened up the market. Hedge funds and other money
managers have stepped up bullish bets, betting that prices will continue to
rise. But Appalachian gas drillers are not returning to drilling just yet, instead preferring a cautious approach. "If we
don't end up with a cold winter, the bull case for '21 is pushed into
2022," CNX (NYSE: CNX) Chief Operating Officer Chad
Griffith told investors on a call.
market tightens. After a substantial glut that saw
dozens of U.S. LNG cargoes canceled, the global LNG market appears to be
turning a corner. Prices in Asia and Europe have hit multi-month highs. Goldman
Sachs said that TTF gas prices (Europe) are on the rise and the rally could be
sustained. Goldman said it expected the headwinds that had led to U.S. LNG
cancellations "to disappear in 2021 as the global gas market moves to a more balanced
setting." The bank stuck with a Henry Hub forecast of $3.23/MMBtu for 2021.
Meanwhile, Bank of America largely agreed and put out a JKM (Asia LNG) forecast
price of $6/MMBtu by December 2020.
suspends investment in Chinese refinery. Saudi Aramco
is suspending its investment in a joint venture developing a US$10-billion
refinery and petrochemicals complex in China amid CAPEX cuts.
trucks could put a dent in emissions. California
recently approved regulations to mandate the increased use of electric
heavy-duty trucks. "The long-term effect of expanding California's approach
nationally would reduce oil consumption in 2045 by 16 to 17%," according to a
Street wants GM to spin off EVs. Deutsche Bank said
that if GM (NYSE: GM) spun off its EV business, it would
immediately be valued at around $15 to $20 billion, and could potentially be
worth up to $100 billion. "Spinning it off essentially creates value, it could
unlock a massive amount of value, actually," Deutsche Bank analyst Emmanuel
Rosner told CNBC. The less GM retains of the electric vehicle operations, "the better it
would be for value creation," according to Rosner.
rig service company files for bankruptcy. Valaris PLC,
a London-based offshore drilling contractor, filed for bankruptcy Wednesday. The company warned of a prolonged contraction in
offshore drilling activity.
Oil to raise $530 million to cover debt. Premier Oil
(LON: PMO) is seeking to raise $530m from shareholders as part of a $2.9bn refinancing effort.
Premier will use $300 million to pay down some of its $2.4 billion debt pile.
tropical storms heading for the Gulf of Mexico. Twin
storms are aimed at the U.S. Gulf Coast, potentially threatening offshore oil
platforms and onshore refineries and processing facilities.
announces Black Sea gas discovery. Turkey announced a
significant natural gas discovery in the Black Sea, which could cut the
countries energy imports if developed. "There is a natural gas finding in the
Tuna 1 well," a source told Reuters. "The expected reserve is 26 trillion cubic feet or 800 billion cubic
meters, and it meets approximately 20 years of Turkey's needs." However, the
source said it could take years to bring online.
The post Oil Tumbles On Shaky Recovery Prospects first appeared in Oilprice.com on August 21, 2020.
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- Bullish Sentiment Is Building In
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- Oil Prices Fall Back After A
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- OPEC-Plus News Is Holding Oil
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- Oil Returns to
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- Oil Prices
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- The Oil Rally
Has Stalled Once Again - OIR 030720
- Oil Markets On
Edge As Second Wave Hits - OIR 300620
- Oil Prices Fall
Below $41 as a "Second Wave" of COVID Hits - OIR 260620
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